Average lending rates could drop significantly to 15 to 10 percent if the current economic fundamentals improves, Chief Executive of the Ghana Association of Bankers, John Awuah has said.
He maintained that the banks were committed to reducing interest rates as long as the economic situation and variables improve, rates would drop automatically.
Speaking on JoyNews PM Express Business Edition programme on the topic ‘Bank Charges and Service Delivery in Ghana’ said “We have seen rates dropped from over 30 per cent some years ago to average 20 per cent, when the situation (economic fundamentals) did improve.”
“We are never excited when interest rates are high because it hurts our businesses too. This is why we are all working together, with the relevant regulators to drive down the cost of credit”, Mr Awuah noted.
The Chief Executive of the Ghana Association of Banks also made making a strong case for businesses to respond to these lending rate cuts.
According to Mr Awuah, this was one of the surest ways that the reduction in interest rates by banks would be felt by all sectors of the economy.
Rising NPLs and role of judiciary
Non-Performing Loans (NPLs) continue to hit levels which many have described as worrying.
The Bank of Ghana put the total industry NPL at the end of June at about GH¢8 billion, a development that has been compounded by COVID-19 which has made it difficult for most businesses to honour their loans because of the negative impact of the pandemic on their operations.
Reacting to the issue of NPLs Mr. Awuah said the Judiciary had not been helpful with respect to checking the high loan default rates in the country.
“We need to let borrowers understand that when they default there are consequences and I think that the judiciary is not helping in this area” he added.
Mr. Awuah noted that “there have been a lot of instances where banks have secured Judgment and later someone pops up that the property belongs to them and the court grants their requests by freezing enforcement”
“We don’t think that enough has been done to deal and check persons that default on loans”, he said.
“I will put the current judiciary support at around 30% in terms of assistance” the Chief Executive of the Ghana Association of Bankers noted.
On the question of capping charges, Mr Awuah said apart from regulation that sought to check illegal fees, commercial banks should be left to allow the forces of demand and supply to guide these charges.